Table 25.2 $$\begin{array} { | l | r | c | }
\hline { \text { Pool Sweeper } } & \text { Output (Revenue) } & \text { Market Share (\%) } \
\hline \text { North Star } & \$ 20,000 & \
\hline \text { Hurricarne } & \$ 16,000 & \
\hline \text { Blue Lagoon } & \$ 2,000 & \
\hline \text { Clean Sweep } & \$ 2,000 & \
\hline
\end{array}$$ Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.What is the Herfindahl-Hirschman Index for this industry?
A)2,500.
B)50.
C)4,150.
D)4,125.

Question

Table 25.2 $$\begin{array} { | l | r | c | } 
\hline  { \text { Pool Sweeper } } & \text { Output (Revenue) } & \text { Market Share (\%) } \
\hline \text { North Star } & \$ 20,000 & \
\hline \text { Hurricarne } & \$ 16,000 & \
\hline \text { Blue Lagoon } & \$ 2,000 & \
\hline \text { Clean Sweep } & \$ 2,000 & \
\hline
\end{array}$$ Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.What is the Herfindahl-Hirschman Index for this industry?
A)2,500.
B)50.
C)4,150.
D)4,125.

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm and then summing the results. First, calculate the total revenue: \$20,000 + \$16,000 + \$2,000 + \$2,000 = \$40,000. Then, calculate each firm's market share: North Star (50%), Hurricarne (40%), Blue Lagoon (5%), Clean Sweep (5%). The HHI is (50^2) + (40^2) + (5^2) + (5^2) = 2,500 + 1,600 + 25 + 25 = 4,150.

Table 252 Refer to Table 25